Felcia Muftic – Macro versus micro

The most valuable take away from a dreary college economics class was my first encounter with some very useful words: micro and macro.

Micro brings political and economic issues down to the consumer, small business and grassroots level and the macro view is the grand scope and impact on the nation and the world. Woe be unto a leader who has no macro vision. Greater woe is to one who fails to convince the micros it will good for them, too.

In three contentious issues – health care reform, the economy, and the closing of Guantanamo Bay – President Obama has had difficulty convincing the micros his macros are to their advantage.

Micro and macro butted heads when it came to closing Guantanamo Bay. Micro concerns are local: “Do not put those terrorists In My Back Yard.” The macro view is “Gitmo is a recruiting poster for Al Qaida.” The Senate voting recently 90-6 on the side of the NIMBY’s illustrates the power of the micro.

The bank bailout’s failure to extend business loans to generate jobs is yet to be tackled. Unrest of the micros is going to bite Obama in the rear in 2010 unless he can convince the them his policies will be a balm to their pain.

In retrospect, Obama committed errors that handicapped his health care reform pitch to the micros. Error: At first the case he made for health care reform was very macro: It is wrong that 47 million people do not have access to affordable care and if we continue the status quo, the GDP will be hurt. The problem is also a micro one: Most Americans have insurance they like, either through Medicare or through their employers. The president’s verbal reassurances, that those who had it could keep their insurance or that no Medicare benefits would be cut ,were not good enough for many and the opponents saw an opening.

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The insurers began spending $1.6 million a day to convince Congress’ constituents that they would be worse off. Reform opponents scored points with deceptive messages of death panels, deficits, and government takeover, scaring the stuffing out of seniors and others who did not trust any government or their new president, anyway.

Error: Democrats were slow to rebut the outrageous claims by opponents. By the end of summer the micros had become so uneasy, support for reform was declining. A campaign to debunk the opponents’ arguments did not get under way until September but it had some effect in stopping the bleeding in the polls and support of a public option continued strong.

Partial error: Earlier in the summer the Obama administration had switched the debate terms from health care reform to health insurance reform and presented a list of consumer protections from denial of pre-existing conditions, dropping coverage on the sick, and more. However, they carefully avoided calling insurance companies villains in an attempt to get a few Republican votes (Republican Olympia Snowe did vote for the Baucus compromise last week) and to cultivate as much cooperation as they could from insurers. Third party groups instead did the dirty work, running ads dramatizing high executive compensation and anti consumer practices.

The reform opponents’ errors may have inadvertently opened the door to anti-trust action and accidentally made two new cases for a public option. Republicans had advocated allowing cross-state purchase to provide competition, but Democrats highlighted a flaw in the law that few had realized until then. Insurance companies are a monopoly and are exempted from Sherman Anti Trust act prosecution. Some members of Congress will submit legislation to remove that exemption. Educating consumers about the existence of a monopoly can also give a new reason for including a public option: By giving consumers a choice of a public plan, the monopoly would be broken up.

Obama’s muted approach to the insurance industry strategy blew up. The evening before the Oct. 13 critical Senate Finance Committee vote, insurers released a “report” they had funded. The committee passed the Baucus bill anyway. The “report” was a declaration of war on reform and a Hail Mary designed to scuttle the bill, rebut the nonpartisan and authoritative Congressional Budget Office estimates that reform would save $81 billion, scare consumers (once again: targeting the micros), and provide fodder for a negative advertising/PR campaign. In the report, the insurance industry claimed they would raise premiums to all consumers if Cadillac plans were taxed. Their report also cooked the books by conveniently ignoring offsetting cost reductions identified by the CBO.

Their “report” may haunt them. It lit a fire under proponents’ argument that a public option was the only way to protect consumers from threatened higher premiums and costs since it would provide them with a choice of a competing cheaper plan.